Analysis: Sanofi's COVID-19 vaccine setback, drug pipeline cast long shadow

Telesis Bio

05/08/2021 07:00

* French drugmaker plans to buy U.S.' Translate Bio for $3.2
bln 
    * Deal seen positive but pressure remains on Sanofi's CEO
    * Pipeline main area of concern for investors, analysts

    By Matthias Blamont
    PARIS, Aug 5 (Reuters) - Pharmaceutical company Sanofi
 SASY.PA  remains under pressure to launch new drugs and
overcome setbacks in the COVID-19 vaccine race, despite a $3.2
billion deal to tighten its grip on promising mRNA technology.
    On Tuesday, Sanofi agreed to buy U.S. partner Translate Bio
 TBIO.O  as it bets on next-generation vaccines and particularly
as the French drugmaker, one of the world's top flu vaccine
makers, seeks to see off competition in one of its major
markets.
    The two companies have been partnering since 2018 and are
developing a COVID-19 mRNA shot together that has entered
clinical trials, as well as an influenza jab.  urn:newsml:reuters.com:*:nL1N2PA0BI 
    The messenger RNA (ribonucleic acid) approach, an area of
Translate Bio expertise, instructs human cells to make specific
proteins that produce an immune response to a given disease. 
    The technology has proven to be successful in COVID-19
vaccines developed by Pfizer  PFE.N /BioNTech  22UAg.DE 
 BTNX.O  and Moderna  MRNA.O . 
    "Although the platform of Translate Bio is not yet proven,
it is a smart move by Sanofi," Wimal Kapadia, an analyst with
Bernstein said. "Bringing the asset in-house will allow them to
move quicker."
    The transaction, backed by the U.S. company's largest
shareholder, is expected to close in the third quarter. It
follows Sanofi's acquisition of another, smaller, mRNA player,
Tidal Therapeutics, in April.  urn:newsml:reuters.com:*:nFWN2M20KN
    But analysts cautioned it won't be enough to ease pressure
on chief executive Paul Hudson to revive the company's drug
pipeline with a blockbuster product and boost the share price.
    Sanofi's shares barely moved on the news on Tuesday and fell
to near three-month lows on Wednesday.
    "The key for this stock to work is convincing the market
that you know how to develop drugs. And bringing in another
company or another technology does not really reflect that, and
there is a lot of frustration with the stock," Kapadia said.
    The stock has risen just 1% since the start of the pandemic
in March last year while rivals in the COVID-19 vaccine race,
Pfizer, Johnson & Johnson  JNJ.N  and AstraZeneca  AZN.L  have
seen double-digit percentage growth of 43%, 29% and 22%
respectively.    
    
    
    REVAMP
    In 2018, the company hired a former Roche executive, John
Reed, to revamp its research and development operations. 
    Sanofi said last month it expects several pipeline
milestones in the second half, including pivotal trial readouts
for Amcenestrant, a breast cancer treatment, and Sarclisa for
multiple myeloma.
    That was followed by Hudson's appointment almost two years
ago to reduce the group's focus to fewer but faster-growing
segments such as cancer and reduce dependence on Dupixent, its
star eczema and asthma treatment that has been leading its
growth.
    "The CEO is clearly going in the right direction and the
Translate Bio deal highlights that," a Sanofi investor speaking
on the condition of anonymity told Reuters.
    "But Hudson's tenure was rapidly overshadowed by the
coronavirus pandemic and snags with the (COVID-19) vaccine," the
investor said, referring to delays developing another COVID-19
shot with Britain's GlaxoSmithKline  GSK.L .
    "Now, we will want to see Sanofi be bolder when it comes to
deals if we look at the group's profile in the longer term." 
    That means looking beyond 2025, analysts said.
    Martial Descoutures, an analyst with Oddo BFH, said Sanofi's
growth profile was well established until then, with Dupixent
expected to make ever greater contributions to profits and
exceeding 10 billion euros ($11.89 billion) in peak sales.
    "(But) we do need more visibility in the longer term. Right
now, the pipeline is the main issue."       
($1 = 0.8410 euros)

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Sanofi shares have lagged rivals during pandemic    https://tmsnrt.rs/3lzQ4P9
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 (Reporting by Matthias Blamont; 
Editing by Josephine Mason and Elaine Hardcastle)
 ((matthias.blamont@tr.com ; Twitter:@matthiasblamont;  +331
8098 1235;))